By Leonard A. Robinson
Acorns, a popular retail investment tool, plans to go public via a merger with a blank-check company at a roughly $2 billion valuation.
The Wall Street Journal reported on May 27 that the Irvine, CA-based company would merge with Pioneer Merger Corp., an acquisitions company affiliated with Falcon Edge Capital and Patriot Global Management. Pioneer’s stock price climbed by 3% in early trading after the news broke.
Acorns, endorsed by celebrities such as Jennifer Lopez and Ashton Kutcher, automatically invests small-dollar contributions from users into a range of stocks and bonds. To date, more than four million people subscribe to the service at $1, $3, and $5 monthly intervals, with the latter interval including bank accounts and retirement plans.
More than 60% of Acorns’ subscriber base is first-time investors, according to MarketWatch. Acord primarily markets to households with incomes below $100,000 and hopes to generate more than $100 billion in annual revenues.
Acorns has $4.7 billion in assets under management in May 2021, according to the Wall Street Journal. Pioneer will contribute roughly $400 million in cash, while another $165 million will come from private placement managed by BlackRock, Inc., Wellington Management, and other investment firms.
Pioneer is another iteration of an emerging trend on Wall Street: special purpose acquisition companies (SPACs). SPACs raise money from various investors and search for a private company to take the raised money and stock listing as an alternative to an initial public offering (IPO). Though profitable in 2020, share prices for SPACs have begun to tumble in recent weeks.
SPACs have also earned the attention of regulators in Washington, including SEC Chairman Gary Gensler.
“They’ve just taken off like wildfire, you might say, in the last six months,” Gensler said to lawmakers. “There’s real questions about who’s benefiting and investor protection.”
Acorns projects it will generate $126 million in revenue this year and $309 million in 2023. It also expects a user base exceeding eight million subscribers by 2023.
Unlike competitor Robinhood, Acorns encourages customers to build diversified holdings instead of making frequent trades. Soon, the company will introduce an option that allows users to customize 10% of their portfolios with individual stocks.
“Acorns will be on the right side of history,” said Acorns CEO Noah Kerner to the Wall Street Journal. “We are not a grow-at-all costs company.”